EIU Global Forecasting Service

US production and investment are rising steadily

January 18th 2018

Nonetheless, OPEC does not exert the level of influence over the global oil market that it once did, owing largely to the recovery in the US shale sector. Unlike OPEC, there is no mechanism for strategic, collective decision-making among US oil producers, meaning that US output is driven by individual actors reacting to market conditions. US oil companies invested heavily in exploration and production in late 2016, encouraged by higher futures prices, which translated into a sharp increase in US crude oil production in early 2017. However, investment fell again in mid-2017 as global oil prices sagged and as cash-strapped US firms shifted their focus to boosting profitability rather than production volumes. International oil prices began to rise in September 2017, and although WTI prices (US benchmark) were slower to recover than Brent crude prices (international benchmark), US firms are ramping up investment again, anticipating higher oil prices in 2018. Monthly data from the US Energy Information Agency (EIA) show that total crude output rose to 9.6m b/d in October 2017, up by 9.2% compared with January. However, this is lower than the production data in the EIA's wekly statistics (which are released more quickly than monthly data, and are typically less accurate) implying that US crude output may not be rising quite as fast as previously expected. As a result of these factors, we now estimate that US oil production rose by 4.3% year on year (5.4% previously) in 2017. We expect output growth to pick up considerably in 2018, to 7.5% (4% previously), as recent investments begin to pay off, helping to keep prices range-bound.